What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin.

Bitcoin is based on a finite number value. Similar to the gold standard. Once you run out of gold or oil or bitcoins, prices will likely shoot up as scarcity takes hold of the market for it.

More Krugman:

And because of that, there has been an incentive to hoard the virtual currency rather than spending it. The actual value of transactions in Bitcoins has fallen rather than rising.

At an early age, I learned that didn’t matter what a magazine said the value of a Ken Griffey, Jr baseball card was, it only matter what the guy across the table was willing to give you for it.

Table after table at card shows would offer to buy at the same too-low price, so I kept it. Still have it.

Back to Krugman:

So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard – because it shows just how vulnerable such a standard would be to money-hoarding, deflation, and depression.